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Competition Commissn

Anglo American/Lafarge Final Report
RNS Number : 4210C
Competition Commission
01 May 2012
 



 

 

 

 

 

 

 

 

 

 

News Release                                                                                                   

23/12                                                                                                                           1 May 2012

Joint venture must sell to get go ahead

The Competition Commission (CC) will require Anglo American PLC (Anglo American) and Lafarge S.A. (Lafarge) to sell a significant portfolio of operations, paving the way for entry by a new competitor into the UK cement market, before their proposed construction materials joint venture can go ahead.

In February, the CC provisionally ruled that the joint venture between Anglo American and Lafarge could damage competition in certain markets for construction materials. In its final report published today, the CC has reiterated its concern that the joint venture would increase the danger of coordination in the market for bulk cement and would reduce competition in local and national markets for other products including aggregates, asphalt and ready-mix concrete (RMX).

To address these concerns, Anglo American (which carries out its operations in the UK through its Tarmac Limited (Tarmac) business) and Lafarge will now be required to sell an extensive package of operations including:

·   a cement plant in Hope, Derbyshire as well as the nearby Dowlow quarry and three linked rail depots;

·   a substantial network of RMX plants, representing well over half of the proposed joint venture's RMX capacity;

·   six aggregate quarries as well as Tarmac's share of two quarries owned through its Midlands Quarry Products (MQP) joint venture with Hanson-and one rail depot; and

·   two asphalt plants as well as Tarmac's share of five plants owned through MQP.

The precise details of how the assets will be sold and packaged will be finalized after publi-cation of the final report, but it is envisaged that the Hope plant and supporting operations including the Dowlow quarry and a substantial network of RMX plants will go to a single buyer. This sale will have to be completed before the joint venture can go ahead. Chairman of the Anglo/Lafarge Inquiry Group, Roger Witcomb, said:

A large-scale disposal like this is the only way to get a new entrant of sufficient scale to break into the UK cement market and thereby ensure that this joint venture does not damage competition. In bulk cement, there are currently only four UK producers and there is evidence that competition is not as effective as it could be. So, if the joint venture is to go ahead, it is essential to maintain the number of cement producers by bringing in a new player through the sale of the Hope cement plant-one of the largest in the country.

The combination of the two parties' RMX businesses as originally proposed would have played a significant role in increasing the potential for coordination in the cement market. The sales will address that issue as well.

The disposals will also remedy the loss of competition for the supply of RMX, aggregates and asphalt in particular areas of the country, given that the markets for these materials are quite localized, as well as for two specialist aggregates prod-ucts-rail ballast and high purity limestone used for flue gas desulphurization in coal-fired power stations.

The range and size of this remedies package is a consequence of the range and size of the proposed joint venture. Our investigation covered seven major products in over 250 geographic areas. Complexity was increased by the links between the products-aggregates are a key input into RMX and asphalt, and cement is the other key input into RMX.

We believe that these extensive sales will help protect all customers' interests in these key markets, which is particularly important when one considers how much construction work is funded by the public purse.

Anglo American, through its UK subsidiary Tarmac, and Lafarge are both global firms that supply construction materials in the UK. The parties proposed to establish a 50:50 joint venture, to which each of them would contribute the bulk of their construction materials businesses in the UK. The two parties' main overlapping activities in relation to the joint venture are in the pro-duc-tion and supply of cement, aggregates, asphalt and RMX. Cement and aggregates are the key ingredients of RMX. As well as being used in the construction of roads and buildings, aggregates can be used in the production of asphalt and in specialist applications such as rail ballast and high purity limestone used for its chemical properties.

In its final report, the CC has concluded that the joint venture could lead to a substantial lessening of competition in the markets for:

·   the supply of bulk cement;

·   the supply of rail ballast;

·   the supply of high purity limestone, when used for flue gas desulphurization (the abatement of acid gas emissions from coal-fired power stations);

·   the supply of primary aggregates for construction applications in 19 local markets;

·   the supply of asphalt in two local markets; and

·   the supply of RMX in seven local markets.

Notes for editors

1.   The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries.

2.   The members of the Anglo American/Lafarge Inquiry Group are: Roger Witcomb(CC Chairman and Group Chairman), Alexander Johnston, Ian Jonesand Richard Taylor.

3.   The Office of Fair Trading (OFT) referred the case to the CC on 2 September 2012. The normal 24-week period case has been extended twice and the deadline for the CC to publish its final report is 1 May 2012.

4.   The Enterprise Act 2002 empowers the OFT to refer to the CC completed or proposed mergers for investigation and report which create or enhance a 25 per cent share of supply in the UK (or a substantial part thereof) or where the UK turnover associated with the enterprise being acquired is over £70 million.

5.   Further information on this inquiry, including the terms of reference and other key documents is available at: www.competition-commission.org.uk/inquiries/ref2011/anglo_american_lafarge/index.htm. 

6.   Enquiries should be directed to Rory Tayloror Siobhan Allen or by ringing 020 7271 0242.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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